Maybe you've heard that leasing a car is more affordable than buying?
Or perhaps you think buying is better because you'll own your vehicle?
Read more to discover the benefits and differences of buying and leasing so that you can determine which financing option is best for your vehicle needs, personal preferences, and lifestyle!
FIVE THINGS TO CONSIDER BEFORE FINANCING:
#1 : Short term costs & long term value
Monthly payments are almost always smaller on leased vehicles than monthly auto loan payments would be on the same vehicle. Lease payments are calculated by estimating how much the vehicle will depreciate over the lease term, then dividing the cost of depreciation by the number of months in your lease term (with interest charges, taxes, and fees added). Monthly payments on a purchased vehicle would instead be based on the full purchase price of the vehicle, not just 3-5 years of use.
Similarly, the recommended down payment on a leased vehicle is also lower than most recommended car loan downpayments. The lower initial expenses associated with leasing allows drivers to save money to use towards other things OR to drive pricier models or higher trim levels that may be too expensive if purchased out-right.
The downside to leasing a vehicle is that when the lease is over, the driver will not own or have equity in their vehicle. Buying a vehicle can mean higher initial expenses, but the money goes towards building equity in the vehicle. Though the vehicle will lose value over time, buying gives the owner the right to the cash value of their car or any positive equity they have built in the vehicle.
#2 : Warranties & future upkeep costs
We all know that a new vehicle typically has far less need for repair and maintenance than an older vehicle. One of the biggest benefits to leasing is that the vehicle is typically covered by the factory warranty during the entire lease term. Factory warranties will protect against any mechanical repair not related to accident or abuse. Since the average vehicle lease term is 3 years and the Acura factory warranty lasts 3 years or 36,000 miles, drivers who lease their vehicle are not likely to experience any costly repairs associated with their vehicle.
People who buy instead of leasing typically drive their vehicle for more than 3 years. As the vehicle gains mileage and ages, the owner will be responsible for the cost of maintenance and repair. Fortunately, there are many great protection packages and vehicle service contracts available that extend the coverage on your vehicle beyond the manufacturer warranty.
Learn more about vehicle service contracts here.
#3 : Minor restrictions or total freedom
Is your ideal vacation packing the car and taking a roadtrip to somewhere new? Or is your vehicle primarily in the local area for general commuting needs?
Always consider how many miles you drive annually and how you intend on using your vehicle when deciding between buying or leasing.
When you buy a vehicle, you have total freedom over how you use it and how you choose to accessorize or modify it. When you lease a vehicle, there will be certain restrictions on its use so that the dealership can accurately estimate the vehicle’s residual value (which determines your monthly payments) and ensure it will be in good condition for resale when your lease is over.
Most Acura leases are for 10,000 or 15,000 miles per year. Leased vehicles are subject to fees if the mileage limit is exceeded. Acura charges $0.20 per mile for every mile beyond the agreed upon limit.
Leased vehicles also have some restrictions pertaining to accessories and vehicle modifications. Factory accessories are allowed and so is window tinting (as long as it abides by state laws), but after-market accessories are not permitted on leased vehicles.
#4 : The latest technology & safety features
Car safety and technology features are constantly evolving. If having the most modern automotive features is important to you, it may be a good idea to consider leasing! The average lease term is three years long, which means you will have frequent opportunities to upgrade to a brand new vehicle!
People who purchase instead of leasing tend to drive their vehicles for more than three years. Eventually the vehicle’s features or even exterior design may seem outdated in comparison to newer models. If having true ownership of your vehicle is more of a priority to you than having the latest and greatest features, buying is a great option! Just be sure to research reliable vehicles with the most desireable safety, technology, and design features for your needs.
#5 : When you & your vehicle part ways
Does trying to resell your vehicle sound like a hassle? Or do you find peace-of-mind in knowing that you could sell or trade your vehicle for its cash value?
For many people, these questions seal the deal on whether or not they want to buy or lease!
Some people find the idea of reselling or trading a car to be overwhelming. What happens with a car at the end of a lease? Its very simple: you can choose to buy it, you can exchange it for a lease on a new vehicle, or you can simply return it and walk away!
On the other hand, many people choose to buy a car so that their monthly payments build equity. Positive equity translates into cash value when it comes time to sell.
Sometimes, the unexpected happens: costly home repairs, medical expenses, or even job loss. An owned vehicle can always be sold to free up some cash. Lease contracts aren’t as easy to get out of though since they have a set term length. For these reasons, it’s worth considering how financially flexible your situation is when choosing between buying or leasing.
LEARN MORE ABOUT BUYING & LEASING
Car Leasing Explained
What happens if you drive more than average miles? What happens at the end of your lease? What happens if I get into an accident with the leased vehicle? When is it not advantageous to lease a car? Can I trade my lease before my lease term is up?
How Do I Finance A Car?
Will answers FAQs about vehicle financing at car dealerships, such as: making down payments, types of cars that can be financed, auto loans vs. credit cards, financing without established credit, credit pulls, and how long the financing process takes.